Pace of Romania’s economic decrease slows down in third quarter

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The pace of Romania’s economic decrease slowed down in the third quarter of 2009 and we could see this country getting out of the recession in the fourth quarter of 2009 or the first quarter of 2010, says the chief economist of the Romanian Commercial Bank (BCR), Lucian Anghel, DSc, in an analysis of the Romanian macroeconomy titled “Romania, a Respite.”

According to the above-mentioned analysis, net exports went on having a positive contribution to the creation of the GDP in the third quarter of this year. Anghel thinks that it will be possible for Romania to get out of the recession if the favourable trend stays in the euro zone.
“Although still in the negative area, industry improved its performances in the third quarter, the demand from abroad was a factor helping industry recover, whereas the domestic component was still at a low level,” said Anghel.

He said that agriculture had a significant contribution to the creation of the GDP unlike in 2008, when the agricultural production was affected in the last part of summer and in autumn by the unfavourable weather. This year weather has been good and the maize production grew by almost 10 percent.
According to the report mentioned before, the residential and commercial sectors in constructions amplified its decrease, but infrastructure work improved a little.

Pressure on the labour market went on increasing, unemployment has constantly grown for a year, especially in the private sector, where several industries had to cope with some important challenges generated by the decrease in the demand from abroad, but especially in the domestic one, reads the report mentioned before.
The BCR chief economist thinks that the fiscal consolidation process will “top the bill in the years to come.”

“After a pro-cyclical fiscal policy has been applied in the past few years, which has fuelled macroeconomic imbalances, Romania should take a fiscal consolidation programme in the years to come.
An inadequate structure of the public spending (with a high share of the current expenses and a low one of the capital expenditure), a high budget deficit (twice as high as the criteria of Maastricht indicated) and serious difficulties in financing the budget deficit from domestic sources, an international financial support (the IMF, the European Commission, the World Bank) missing, are the main challenges for the Ministry of Finance,” said Lucian Anghel.

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